What Yahoo! Could Do to Soothe Investors' Nerves

This will be the first earnings call for new Yahoo! CEO Scott Thompson

NEW YORK ( TheStreet) -- Yahoo! ( YHOO) will report its earnings this afternoon.

You shouldn't expect much in terms of the actual results. Investors will care about what the company says about its future.

This will be the first earnings call for Scott Thompson, the new CEO, since he's been in the seat for a full quarter. From now on, he owns all the results.

We have had an announcement of 2,000 job cuts two weeks ago and a company-wide reorganization last week.

As part of its earnings today, it would be surprising if Thompson didn't try to kitchen-sink these results. That means he'd be smart to take as many one-time write offs as he can related to the layoffs. If there's bad news about the outlook for the core business (relating to display ads or search or both), now would be the time to spring it on the market. Get all the bad news out there.

From Google's ( GOOG) call last week, we know that their cost-per-clicks (CPCs) were down 12% in the quarter (Y/Y), even though paid clicks were up. We also know that Yahoo!'s absolute number of queries dropped in the last quarter, as per a third party study. Put it together and it's likely we're going to see more weakness from Yahoo! search in the quarter -- which has been a trend since Yahoo! signed the outsourced deal with Microsoft ( MSFT) in 2009.

In display, it's likely going to be another quarter of treading water for Yahoo! Hopefully, there are some signs of strength in the new year. 2012 is going to be the year where we discover whether advertisers are meaningfully moving ad dollars to Facebook or if they were just dipping their toes in the market in 2011, when they hurt Google and Yahoo!

So, what could Scott Thompson say or do to soothe the nerves of investors?

Something has to happen in search. Yahoo!'s search queries are shrinking. The results of the partnership with Microsoft have been underwhelming for investors. It could renegotiate terms with Microsoft: announce it is abandoning Bing for Google and why that will be possible with the DOJ; announce it is shutting down search with an explanation of why that will benefit the company in the long run; or announce -- along with Microsoft -- that Facebook is taking over Bing, and Yahoo! will partner with Facebook as part of this.